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Should I Settle My Debt or File for Bankruptcy?
Each year, thousands of Americans file for bankruptcy. Given how beneficial bankruptcy can be under certain circumstances, it is not difficult to understand why so many people choose to take advantage of this opportunity.
However, filing for bankruptcy is not the only debt relief option available for those who are struggling to consistently meet their financial obligations, nor is bankruptcy the best option for certain situations. As a result, it is important for debtors who are struggling to carefully review various debt management opportunities before determining which one(s) make the most sense for them.
For example, you may have heard about the potential benefits of debt settlement. Depending on your unique circumstances, settling your debt may or may not be a better choice than filing for bankruptcy.
Debt Settlement
The debt settlement process can be helpful if you can pay a large fraction of your balance at once in exchange for relief of the remainder. For example, if you are past due on a medical account that has a balance of $5,000, the provider’s billing office may allow you to pay $3,500 at once in exchange for closing your account.
Is Chapter 7 Bankruptcy or Chapter 13 Bankruptcy a Better Option?
If you have decided that filing for bankruptcy will help you to get your finances back on track, it is time to decide which kind of bankruptcy relief you will be requesting. In most areas of the country, individuals and married couples filing jointly have two primary options: Chapter 7 and Chapter 13 bankruptcy. The matter of which one is a better option depends upon a filer’s unique priorities, needs, and financial situation.
Chapter 7 Bankruptcy
If you are eligible to file for Chapter 7 bankruptcy, you are not facing an immediate risk of foreclosure, and a significant fraction of your debt is eligible for discharge, this is likely to be the best option for your circumstances.
At the conclusion of a successful Chapter 7 bankruptcy case, a filer’s eligible unsecured debts—including credit card bills and overdue medical accounts—are discharged. This means that the debt is wiped out and affected creditors can no longer demand repayment.
Will You Lose Everything if You File for Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is often referred to as “liquidation bankruptcy.” This nickname gives many potential filers the impression that they will lose all of their property if they take advantage of the debt relief opportunity that Chapter 7 bankruptcy affords. Thankfully, this common misperception is not grounded in reality.
The vast majority of people who are eligible to file for Chapter 7 relief do not own much valuable property. As a result, they do not risk having to liquidate any – or many – of their assets.
The Role of a Chapter 7 Trustee
The most significant benefit of filing for Chapter 7 bankruptcy is that this process allows qualifying non-secured debts to be discharged without repayment. This means that a filer’s eligible debts will be eliminated at the conclusion of their case, even though they have not made any additional direct payments to their creditors.
Should You File for Bankruptcy or Pursue Bankruptcy Alternatives?
There are many resources available for people who are struggling to repay their debts on time. The best-known debt relief opportunity is bankruptcy. Filing for bankruptcy is an excellent option under many circumstances. However, it is not the only debt management solution that individuals who are navigating unmanageable debts may benefit from considering. A number of bankruptcy alternatives might be more beneficial for specific situations.
When Is Bankruptcy Preferable?
Bankruptcy allows filers to discharge qualifying unsecured debts. Chapter 7 filers can receive a discharge within a few weeks, as they are not required to repay their creditors before benefitting from this form of relief. Chapter 13 filers make manageable payments on their debt over the span of 3-5 years before receiving a discharge. Once the discharge is entered, the filer is no longer responsible for the debt nor can their creditors ever demand repayment of it again.
The Benefits of the Automatic Stay in Bankruptcy Proceedings
If you are struggling to repay your debts on time, you have likely spent time wishing that there was a “pause button” that you could hit so that you would be granted the time you need to find solutions to your financial challenges. If so, you should know about the protections afforded by a legal resource commonly referred to as the automatic stay.
While the automatic stay does not halt time, it does halt your creditors’ ability to demand payment and engage in other collection activities while your Chapter 7 or Chapter 13 bankruptcy case remains active. This means that, from the moment that you file bankruptcy paperwork with the court until the moment that your case is favorably closed or dismissed, your creditors will be legally required to stop breathing down your neck.
The Purposes of the Automatic Stay
There are two primary reasons why the courts protect the immediate interests of bankruptcy filers via the automatic stay. First, bankruptcy courts need time to review bankruptcy petitions. If creditors keep imposing fees, pursuing legal action, and otherwise altering a consumer’s debt situation before the court has been given the opportunity to review their case, the entire situation becomes a moving target. By halting creditors in their tracks, courts can evaluate a debtor’s entire financial picture before it evolves.
Is Filing for Bankruptcy a Good Option for You?
Every year, hundreds of thousands of Americans choose to file for personal bankruptcy. Although a stigma was traditionally associated with seeking bankruptcy relief, the Great Recession of 2008 taught the public that everyone, no matter how hard-working and responsible, can find themselves in need of assistance through no fault of their own.
If you are struggling to pay back your debts on time, you are not alone. Thankfully, there are ways to get your finances back on track. If you are thinking about filing for bankruptcy, this opportunity may or may not be a great option for you. Whether filing for bankruptcy makes good sense depends upon the unique nature of your circumstances.
Why and How Are You Struggling?
Chapter 7 bankruptcy helps low-income filers to rid themselves of certain unsecured debts, like medical bills and credit card balances. Chapter 13 bankruptcy helps filers to reorganize their debts so that repaying what they owe becomes a manageable process.
How Are Different Types of Debts Addressed in a Bankruptcy Case?
Bankruptcy is an avenue that may be available for individuals who are struggling to manage their debts. It can be an effective way of dealing with a wide variety of debts, such as medical bills, credit cards, mortgages, loans, and even unpaid taxes. However, understanding how different types of debts will be handled in a bankruptcy case is not always easy, especially since debts may be addressed differently depending on whether a person chooses to pursue a Chapter 7 or Chapter 13 bankruptcy. With the help of a bankruptcy lawyer, you can evaluate the different types of debts you have and determine your best options for relief.
Secured, Unsecured, and Priority Debts
Your approach to bankruptcy will depend on a number of factors, including the extent of your debts, the value of the assets you own, and the amount of income you earn. During the bankruptcy process, you may need to address debts such as:
Is it Possible to Convert a Chapter 7 Bankruptcy to Chapter 13?
Filing for bankruptcy can be a difficult decision. In some cases, a person may file for Chapter 7 bankruptcy, but they may later determine that a Chapter 13 bankruptcy would be more beneficial. In these cases, a person may be unsure about whether it is possible to convert from one type of bankruptcy to another. While these types of conversions are possible, there are certain criteria that must be met, and it is important to understand how bankruptcy laws may affect a case.
What Does it Mean to Reaffirm Debts During Bankruptcy?
Are you considering filing for bankruptcy and have questions about the process? One question that often arises in these situations is whether you should reaffirm certain debts. Reaffirming a debt means you are willing to repay a debt that would otherwise be discharged through bankruptcy. It is important to understand the implications of reaffirming a debt before deciding if this is the right path for you. Understanding the process of reaffirming a debt and the obligations that may apply to you in these situations can help you make the best decision for your financial future.
What Is the Statute of Limitations for Credit Card Debts in Texas?
The laws put in place by different states have time limits that determine when a law may be enforced. The time limit for a certain law is known as the "statute of limitations." In cases where people have debts that are owed, the statute of limitations that has been defined in the laws of their state determines when creditors can take legal action to collect these debts. For people who live in Texas, it is important to understand what statute of limitations may apply and when they may be able to avoid paying debts or seek debt relief through bankruptcy.
What Is the Statute of Limitations in Texas?
In Texas, the statute of limitations for credit card debts is four years. This time limit begins on the date that the last payment was made toward a debt. This means that if four years have passed since a debtor made any payments toward the balance on their credit card, the creditor can no longer sue them to seek repayment.
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